The New York Federal Reserve Bank’s Empire State Manufacturing Survey noted an acceleration in overall business conditions in February, with its composite index up to 19.5 from 13.5 in January. This continues an upward trend since November; prior to that point, the index indicated contraction for five straight months. With that said, the rate of increase of new orders eased somewhat; the index of new orders dropped from 13.7 to 9.7. Still, growth in new orders has expanded for three straight months.
Other variables were mixed, but remained expansionary overall. Shipments, capital spending and the average workweek improved, with their indices rising in February. Employment growth eased somewhat, though, and inventories contracted. Pricing pressures remained virtually unchanged.
Looking ahead, New York manufacturers remain highly optimistic about future activity. This is true even with the forward-looking business conditions index dropping from 54.9 to 50.8. Only 7.2 percent of respondents felt that business conditions had deteriorated, for instance. Other variables – including new orders, shipments, employment and capital spending – suggest a strong expansion over the next six months in manufacturing activity.
In a series of special questions on capital spending, 45.7 percent of respondents said that they planned to increase investments this year. This compares to roughly one-quarter of those taking the survey who forecast a decline. This mostly mirrors the responses found last year. The median capital spending level for 2012, though, was $375,000 – up from the median figure of $300,000 in 2011.
Chad Moutray is chief economist, National Association of Manufacturers.
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